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The raw truth of Europe’s raw materials

As the world’s eyes were fixed on United Nations Climate Change Conference COP27 in Egypt, a more low-key bureaucratic gathering was taking place in Brussels, working on growing the industrial supply chains needed to wean the Continent off the most carbon-intensive fuels for both environmental and national security reasons.

Indeed, European Raw Materials Week has now been imbued with an added sense of purpose and urgency, as Russia’s invasion of Ukraine, and some European Union members’ subsequently unavoidable turn toward coal to get through the winter, has exposed Europe to the harsh realities of energy security.

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Being dependent on unreliable and hostile actors elevates the strategic imperative of avoiding new dependencies for the critical materials needed to power the green transition with solar panels, advanced batteries and wind turbines — an opportunity and challenge that arguably constitutes a historic inflection point currently being shaped by several converging trends and events.

For one, due to recent landmark legislation across the Atlantic, the United States will now be devoting hundreds of billions of dollars to sustainable energy initiatives, technologies and supply chains. However, there’s understandable consternation that purchasing tax credits for electric vehicles (EVs) through the new Inflation Reduction Act (IRA) will advantage countries that share a free trade agreement with the United States — excluding those in the EU.

This is unnecessarily restrictive, and the U.S. should include preference for EU and NATO members — however, it doesn’t mean Europeans shouldn’t play a significant role, and reap significant benefits, from partnering with North America to diversify its supply chains for raw materials.

The EU currently spends tens of billions of euros subsidizing the purchase of EVs, most of which are heavily reliant on sources for mining and processing that are dominated by China. Getting serious about “Made In Europe” means getting serious about these supply chains as well. Europe has significant mineral processing capacity, and this can be expanded to loosen China’s grip on — and possible weaponization of — this crucial phase of the EV battery supply chain.

For example, the EU already ranks second in global processing capacity for nickel, cobalt and manganese, according to Benchmark Mineral Intelligence. Meanwhile, with limited mining and processing available domestically, many U.S. automakers are now scrambling for alternate sources for such raw materials, so they can be eligible for the IRA’s tax credit. However, minerals extracted from IRA-compliant countries (North America or U.S. Free Trade Agreement partners) could be processed in ever-growing quantities in Europe, and the resulting EV batteries would still qualify for the tax credit within the U.S.

Additionally, information technology such as blockchain is becoming increasingly available, allowing governments, businesses and consumers to track where materials and components come from — as well as how they’re extracted and processed. Thus, democratic nations could agree to condition market access on shared human rights, labor and environmental requirements, in effect creating a “race to the top,” turning high standards into competitive advantage.

Collectively, the EU and North America make up close to 45 percent of global GDP, which provides enormous leverage. Other nations must either comply with these standards — thus, raising their costs and limiting their price advantages — or be excluded. Given today’s supply chain imbalances, the early stage of that transition won’t be easy. But if the world’s technologically advanced democracies have the will, and stick together through the preliminary turbulence, the means do exist.

European Commission President Ursula von der Leyen noted as much in her State of the Union address earlier this year, observing that with “like-minded partners,” Europe can ensure labor and environmental standards outside its borders as well. We have models of collaboration to build upon for this — such as the former Trilateral discussions (including the EU, U.S., Japan — and now Canada and Australia as well), which address what “responsible” mining and permitting really look like.

Finally, the fallout from Russia’s aggression in Ukraine has also laid bare the risks of jettisoning incumbent sources of energy too early in the transition to a carbon-neutral economy. Even the most climate-friendly power generation systems will require tremendous amounts of energy — principally electricity. And in this capacity, the U.S., United Kingdom, Canada and Norway have vast natural resources to help end the EU’s dependence on Russia, even as we recognize this isn’t a sustainable solution.

These priorities are all consistent with recent European policy initiatives, from REPowerEU — a plan to rapidly reduce dependence on Russian fossil fuels — to the Critical Raw Materials Act. They require widening the aperture of our thinking and collaborating on a comprehensive approach to deliver on the EU’s Green Deal and strategic autonomy

President von der Leyen led her address by calling Russia’s aggression “a war on our energy,” as part of a broader assault on Europe’s economy, values and future. And getting our energy response right will require a shared transatlantic approach to critical raw materials, which addresses today’s requirements as part of — and not in conflict with — a prosperous, carbon-neutral future, Politico writes.

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